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Fifth Street Finance Corp. Message Board

  • thewisejman thewisejman Jun 9, 2014 10:34 AM Flag

    This time is DIFFERENT

    I have been reading this phrase regarding the recent stock market bloom and I could not believe it I actually heard from another guy saying it on CNBC this morning. He said the public sector bailed out the private sector in the last financial crisis and now everything is honky donky. Another guy even predicted that S&P would reach 2000 this week. The scary part is S&P already reached 1951.74 right now and can indeed reach 2000 by the end of this week, or will it?

    Found this May 14, 2014 article "Preview: What Does “This Time Is Different” Really Mean?" says it well:

    "What does ‘this time it’s different actually mean?

    Stated simply, Valuation always matters. There is no new paradigm that will ever change that. What you pay for a stock or index will ultimately determine the return it generates over time.

    What is never different is the behavior of investors. It is always driven by greed and fear. That is simply human nature at work.

    We all understand the basic formula for valuation: Price relative to earnings, or P/E ratio. And as I noted yesterday, there are many ways to measure valuation. “Stocks can be defined as cheap (the rule of 20, which adds the inflation rate to a stock index’s price-earnings ratio) or fairly priced (forecast P/E), somewhat overpriced (12-month trailing P/E) or wildly overpriced (Shiller’s cyclically adjusted P/E).”

    What Templeton was not suggesting was for investors to ignore the many factors that actually impact valuation. Metrics such as GDP, Unemployment, Inflation, Interest Rates can move to extremes, and this should be noted. He was not suggesting these factors should be ignored because they are “different” than they were previously. Rather, he was warning that you should check your own behavior if you believed a new era was upon us and that valuations no longer mattered."

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    • I was actually considering disposing some of my DXD if this unstoppable market continues to rise but after hearing this statement "This Time is different" I am going to wait till this Friday (the 13th) before I will do anything. There is a hint that a rotation from fixed incomes or yield sensitive investments (financials) to commodities might have already started. I started small positions on APA, APC and HES today.


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